The US recently raised tariffs, as announced earlier this year – however, on Monday, the US then delayed the tariffs on Canada and Mexico until March 4. In the short-term, this reprieve helped CAD and MXN appreciate against the USD. Below, we outline the impact of such tariffs if they are to remain. 

What’s the impact on the economy?

Firstly, as a reminder, we had outlined in our 2025 market outlook that trade tensions were a means to an end outside the economic sphere, e.g., concerning immigration and the fentanyl crisis. We see them largely as a tool of negotiation tactics to reach other goals. We still believe that tariffs are ultimately only temporarily imposed until politically acceptable solutions are achieved.

Second, the trade tariffs are likely to have less of an inflationary impact in the United States than a deflationary impact elsewhere. The US consumer is too dominant, and foreign manufacturers are likely to grant concessions on prices to keep market shares. A stronger US dollar also helps to buffer the trade tariff impact. Looking at the details, the effects will likely be more nuanced. In some segments, the powers are more balanced, for example in the case of oil, metals, and autos. Canada can likely sell its oil on global markets after transit through the United States without US tariffs. Under such circumstances, the tariff burden will fall rather on US consumers. 

Similarly, the cars produced in Mexico for the United States are less likely to be sold elsewhere, which allows manufacturers to increase prices.

Third, the tariff spat injects a decent dose of uncertainty into markets, just as expected. The uncertainty spans the hard-to-predict political reactions and possible period of tit-for-tat, but also the yet-unclear economic effects. Europe so far remains spared but is likely to face another round of US trade tariffs too. The coming weeks and months will reveal whether trade politics spirals out of control, and how long the economies of the United States and its trade partners will witness hits on household budgets and business profits.

As a consequence of the elections, we already expected the US economy to teeter closer to overheating territory. Our forecast of US consumer inflation hitting 3.7% in the third quarter might be exceeded. Besides tariffs, immigration policies and constraints on labour supply are inflationary. Conversely, our 2.5% growth forecast beyond mid-2025 might be undershot. Initial estimates put the negative impact on growth from more lasting additional tariffs at 0.4%. We will continuously assess the situation and update our views if necessary.

As we have mentioned, for US trading partners, the outcome in that case would be deflationary and recessionary. The latter could in turn be the final wake-up call for China and for the eurozone after the upcoming German elections to finally help themselves via stimulus programs.

Impact on metals

For gold and silver, the impact of tariffs is primarily on the refining value chain. The US imports a significant amount of gold and silver doré from Canada and Mexico for refining, which has now become more expensive. Some of this material might be rerouted to Europe.

Within the industrial metal markets, aluminium sticks out. The US relies heavily on Canadian aluminium, making up around two-thirds of its total imports, with some corporations integrating the value chain across the border to reap the benefits of both locations. More broadly, the impact of the tariffs on the industrial metals will be focused on imports of semifinished and metals-intensive consumer products from China and Mexico, such as cars and electronic or household goods. While China’s relevance has shrunk during the past few years, that of Mexico has grown as it expanded its footprint in the US. 

That said, in many cases, the products that are made in Mexico originate in China-backed factories. Generally speaking, the fundamental impact on metals demand depends on the question of how long the tariffs will remain in place. 

Regarding our earlier points of tariffs being inflationary at home in the US – primarily via higher domestic price premiums – and deflationary abroad, we still see the tariffs as an overhang for sentiment that should keep industrial metal prices in check, at least in the short term. 

What does this mean for investors?

Investors should not despair about the obvious turmoil that lies ahead. Instead, we suggest staying calm and waiting for the twists and turns to evolve before taking any sizeable action. If reason holds on both sides, the outcome will be settled sooner rather than later. If not, the rush into safe havens will still be warranted later on. Until then, we suggest taking the current imponderabilities as another slippage while markets climb the wall of worry.